Selling your Business: What Makes You Attractive to Buyers

Whether you’re looking to make a change in the market or to retire, eventually every business owner considers selling their business. But selling your business can be difficult, especially when it comes to attracting a buyer.

What is it that buyers are looking for? What is it that makes one company more attractive than another? There are a lot of things to keep in mind when selling your business.

First, let’s face facts: If a buyer is looking to purchase your company, it’s probably not because they’ve always wanted to be a software developer, a chemical manufacturer, or an electronics retailer. They’re looking to make a return on their investment, which means that your business needs to have a proven record of return on capital. Nobody is going to want to buy a company that can’t seem to make any money.

However, there are a couple of things that can entice a buyer, even if profits aren’t really through the roof.

Market position: If your company occupies a niche in the market—and has a reasonably strong position within that niche—then that can be worth something to a buyer. The niche can’t be too narrow, however—I can start a company tomorrow that manufactures the best floral bonnets in the world, but no buyer would be interested in such a narrow marketplace.

Industry adjustments: If your business operates in an industry that is about to undergo significant changes—federal regulation shifts, for instance—then that can represent an opportunity to an enterprising buyer. Changes can signal chances for growth, and that prospect can bring buyers to your doorstep.

Additionally, some industries aren’t particularly popular at a given point, and many of the businesses within those industries are valued lower during that time. But they can be a big opportunity for the right buyer. Who could have foreseen the return of the fixed-gear bicycle, for example? Someone did, and they took advantage of the opportunity for expansion when it arose.

Potential for further investment: Some businesses are well-positioned to acquire additional assets relatively quickly. Purchasing one company may put a buyer in a better position to purchase a second or third, and expand into a growing market. Even smaller companies can attract buyers just by virtue of their competition in this regard.

A strong management team: Even if your profits are sky high, buyers may be spooked by a poorly-run company. Replacing staff is costly and time-consuming. Most buyers will prefer to work with a team of industry professionals with a proven track record of success. Some of these buyers won’t have much experience in your market, and they’ll want all the help they can get to make sure that your company continues to succeed.

Just as important, buyers are going to look at the culture of your business, which is directly related to the quality of its management. How are employee infractions handled? How is office morale (culture)? Do the employees dread coming into work, or are they appropriately engaged and compensated? Contrary to popular belief, most buyers don’t want to buy a company, fire everyone, then bring in their own people. Many of them want to continue with the same staff, especially if the business is already on the right track.

A company with a well-managed (succession) team is always going to be more attractive than a company without one.

 

These are just some of the things that you should consider when selling your business. In reality, there are countless others that may influence a buyer one way or another, but the above are some of the most tried-and-true methods to attract one of your own.

 

Just like in the day-to-day activities of running your business, it helps to have experts on your side when selling your business. Merger and acquisition advisors and firms work to market your business the right way, and can make the difference when attracting a buyer.

These experts identify the highlights of your company—including whichever of the above apply in your case—and target specific purchasers who are already looking for businesses for sale. While they work to both find a buyer and negotiate the best transaction/structure possible, you are still free to focus on running your business (something many fail to do when they try to sell on their own). Remember, if your company loses value during the negotiation process, that can spook your buyer, and spoil the transaction.